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DIRECTIVE No

DIRECTIVE No. 442-TTg OF JULY 3, 1996 OF THE PRIME MINISTER ON THE FORMULATION OF THE 1997 PLAN ON SOCIO-ECONOMIC DEVELOPMENT AND THE STATE BUDGET ESTIMATE

The first six months of 1996 saw fairly good results in the implementation of the socio-economic development plan: Production, goods circulation, export and import achieved at a fairly high growth rate in the positive direction; inflation was controlled; and improvements were seen in many social aspects. Nevertheless, a number of difficulties and problems have emerged, including: many budget revenues were lower than the estimate made early this year, such as revenues from import-export duties and certification of the land-use right and remittances by non-State industrial, trade and service sectors; ineffective control and prevention of tax evasion and smuggling; delayed execution of the capital construction plan; large inventories of unsold local products which impeded economic growth and the collection of State budget revenues.

In order to implement successfully the Resolution of the IXth National Assembly adopted at its 8th session (October 1995) on the 1996 tasks, the formulation of the socio-economic development plan and the draft State budget of 1997, the Prime Minister requests the Ministries, branches and localities to implement the following:

I. DIRECTING THE EXECUTION OF THE 1996 PLAN

The Ministries, branches and localities shall evaluate the situation in the execution of the plan, objectives, programs and projects in the first six months, clearly point out the achievements and failures, analyze their causes and devise execution measures for the last six months in order to strive to fulfill and over fulfill the 1996 socio-economic development plan; and at the same time, promptly undertake the following activities:

1. The Ministry of Planning and Investment shall coordinate with the Ministry of Finance and other relevant Ministries and branches in examining the major balances of the economy, proposing measures to boost business and production, stabilizing prices and expanding the markets. The Ministries, branches and localities shall direct their units to make maximum use of their production capacity, increase output, cut down costs and reduce prices..., to strive to increase the State budget revenues.

2. The Ministry of Planning and Investment and the Ministry of Finance shall coordinate with the Ministry of Trade and the General Department of Customs in revising the list of imports on the basis of the situation of prices, production and goods supply and demand and submit it to the Government so that the Government can adjust the imports in line with plan and adjust in time the tax rates for a number of imports within the prescribed tax bracket in order to encourage the development of domestic production, create conditions for balancing money and goods, curb inflation and ensure sources of revenues for the State budget.

3. The Ministry of Finance and the General Department of Customs shall coordinate with the branches and localities in intensifying inspection and supervision to combat losses of budget revenues and smuggling; taking effective and resolute measures to urge establishments to remit all the revenues left over from 1995 and the first six months of 1996 into the State budget; taking every possible measure to fulfill the task of collecting budget revenues in 1996 already adopted by the National Assembly.

4. The Ministries, branches and localities shall expeditiously organize the execution of the assigned plan on capital construction, complete all the procedures related to capital construction as a basis for capital allocation. The Ministry of Planning and Investment, the Ministry of Construction and the Ministry of Finance shall work together to remove obstacles in the mechanism of managing investment capital so as to ensure strict management of investments in capital construction, and, at the same time, simplify the procedures so as to create conditions for accelerating the implementation of the projects registered in the plan...

5. In directing the State budget spending, the Ministries, branches and localities should give priority to capital construction investment, funding national programs, wage and wage-related payments and other urgent tasks; restrict and temporarily postpone unnecessary expenditures on purchases, repairs, meetings, etc.

From now to the end of this year, no additional budget spending outside the plan shall be allowed, except in extremely urgent cases. The Ministries, branches, localities and establishments must practice thrift and rearrange their expenditures so as to meet urgent and newly arising spending needs. The spending needs which have been decided but not yet included in the budget plan early this year should be examined to slow down the implementation tempo and should be put into the 1997 plan.

The Ministry of Finance shall help the Ministries, branches and localities to evaluate the possibility of accomplishing the task of budget collection and spending for the whole year and recommend to the Government the areas where expenditures can be cut down.

6. The Ministries, branches and localities shall conduct a preliminary review of their practice of thrift and combat against wastefulness, corruption and smuggling in the first six months and work out implementation measures for the last six months which shall be reported to the Government and sent to the Ministry of Finance for synthetization.

7. The Pricing Commission of the Government shall assume the main responsibility and coordinate with the concerned Ministries and localities in submitting to the Government measures to stabilize prices in the last six months and keep the consumer goods and service prices index below 10 per cent for the whole of 1996.

8. The Ministries, branches and localities shall work out major solutions to guarantee the achievement of the development objectives in the branches, domains and localities under their charge, propose mechanisms and policies to release the production capacity, better mobilize the resources of the different economic sectors; identify the mechanisms which should be studied and issued right in 1996 and implemented from 1997.

II. FORMULATION OF THE SOCIO-ECONOMIC DEVELOPMENT PLAN AND DRAFT BUDGET FOR 1997

1. Key tasks of 1997:

The tasks set for 1997 shall have to continue to bring into play the positive factors achieved over the past years, overcome shortcomings and weaknesses, seize the new opportunities for development and create conditions for the successful attainment of the socio-economic objectives laid down by the VIIIth Party Congress.

The 1997 plan continues to be formulated and arranged in accordance with the overall task and the major guidelines for the whole 5-year period 1996-2000. The 1997 socio-economic development objectives must, on the one hand, reflect the continuation of the high and sustainable growth and, on the other, conform to the national master plan for long-term socio-economic development and the development plan of each sector, locality and territorial region.

In 1997, efforts should be concentrated on the following five major issues:

a/ Maintaining the high economic growth rate, raising the economy�s efficiency, achieving positive changes in the implementation of the development programs and fields defined in the five-year plan.

b/ Expanding rapidly the country�s financial potential, continuing the tax system reform, restructuring the budget on the basis of the Law on the State budget, encouraging higher budget revenues and more efficient use of budgetary capital. Proceeding with the formulation of policies and mechanisms to mobilize all the national financial sources. Raising the operating capability of specialized banks, ensuring effective capital mobilization and lending in response to the demand of a growing economy. Continuing to take measures to check and control inflation, striving to keep the consumer goods and service prices index below 10% for the whole of 1997.

c/ Stepping up the fruitful implementation of social and cultural development programs; creating a new change in the fields of culture, arts and literature, radio and television, public health care, population and family planning and other social aspects. In particular, taking a vigorous stride in developing education and training, taking one more step towards raising the people�s knowledge, continuing to eradicate illiteracy and universalize primary education; training, fostering and improving the quality of human resources to meet the immediate and long term needs.

d/ Concentrating efforts on the socio-economic development program in mountainous and ethnic minority areas, deep-lying and remote areas, creating a new step of development in these areas by tapping all local resources and mobilizing nationwide support. Paying attention to developing the communication network; building the irrigation system; transmitting electricity to townships and the communal centers; expanding health and education network, covering these areas with radio and television broadcast and information and postal systems...; implementing the poverty eradication and hunger alleviation program.

e. Continuing to strengthen and renew the State management mechanism in various branches and levels; speeding up the administrative reform, establishing order and discipline in economic and social management; maintaining political stability and social safety in order to accelerate economic development and ensure firm national defense and security in any circumstance.

2. Projected economic growth in 1997 for a number of key targets compared with 1995:

- GDP 9-10%;

- Agro-forestry-fishery production value 4.5-4.9%;

- Industrial production value 14-15%;

- Services value 12-13%;

- Total export value 28%;

- Total import value 23%.

3. Regarding the State budget:

- Striving for a stable, healthy and remarkably improved national finance; collecting taxes and fees in accordance with law, supervising and tapping all sources of revenues, effectively combating tax evasion; ensuring the need of regular expenditures at a rational and economical level, arranging payment of due and overdue debts; increasing the capital for development investment both in absolute terms and in percentage.

- The draft State budget must be elaborated from the grassroots up to ensure its reliability and practicality so as to create conditions for a stable assignment of budget management to lower levels in 3 to 5 years in accordance with the Law on the State Budget; In the immediate future, calculations should be made to ensure stability in 3 years from 1997 to 1999.

- The budget must be kept in a positive and practical balance; all budget revenues and expenditures must be reflected in the draft State budget and managed by the State Treasury. Foreign borrowings by the Government for relending must be also incorporated into the State budget so that the lending and debt payment can be managed.

- Striving to collect taxes and fees equivalent to 20-21% of GDP 70% of which shall be used for regular expenditures, with priority given to financing education and training and meeting the needs of various fields: health, transport, culture and information activities, sports, science, national defense, social security, order and safety.

- Sources should be allocated to reimburse domestic budget borrowings made for the purpose of development investment in the previous years; continuing to restrict the spending of State budget allocations on purchasing cars and building new offices of State agencies as well as Party and mass organizations. For the projects which would overfulfill its plan by December 31, 1996, their capital construction expenditures deriving from the State budget must be incorporated into the 1997 plan so that they can be settled; for the projects which are unable to fulfill its plan in 1996 and need to continue building, their expenditures must be incorporated into the 1997 plan. In allocating capital construction investments, special attention must be paid to building infrastructure works in mountainous areas, the Central Highlands, the Mekong River Delta, in order to bring about a marked improvement in these areas immediately in 1997.

- The overspending of the State budget must correspond with the realistic possibilities of domestic borrowings as well as foreign concessional loans; no borrowing of foreign commercial loans shall be made and no domestic short-term bonds carrying a high interest rate shall be issued to make up for the State budget deficit. The State budget overspending excluding foreign borrowings for relending must be less than 3% of GDP.

- The Ministries, the State agencies shall, according to their assigned functions, have the task of drawing up specific socio-economic targets such as the quantity of crude oil to be tapped, the output of some essential products (cement, electricity, alcohol, beer, cigarettes...), value and structure of exports and imports, the number of pupils and students, the number of hospital beds, payroll... and notify in time the Ministry of Finance and the Ministry of Planning and Investment so that they can serve as a basis for elaborating the plan and draft budget of 1997.

- Since 1997 is the curtain-raiser of the implementation of the Law on the State Budget in which a stable assignment of budget management shall be designed for the subsequent years, the administration of various levels may not have sufficient grounds for the decentralization of management of revenue sources, spending tasks, the distribution ratio of revenues and the additional allocations from the budget of the higher level to decide the draft budget of their own level before the National Assembly adopts the draft State budget. Therefore, the People�s Committees of various levels shall base themselves on this Directive and the guidance of the higher level to draw up their draft budgets and send them to the higher level which shall synthesize them and prepare the draft State budget. After the National Assembly adopts the draft State budget, the People�s Committees of various levels shall adjust their own draft budgets to conform to the plan assigned by the higher level before submitting them to the People�s Councils of the same level for decision.

III. ORGANIZATION OF IMPLEMENTATION:

1. The Ministry of Planning and Investment and the Ministry of Finance shall collaborate closely to provide guidance for the Ministries, branches and localities in designing their plans suitable to the general situation and to ensure positive and stable balance.

- The Ministry of Planning and Investment shall guide the Ministries, branches and localities in synthesizing and summing up the socio-economic plan; assume over the main responsibility and coordinate with the Ministries, branches and localities, with the participation of the Ministry of Finance, in working out the socio-economic plan and the list of capital construction projects together with the investment volume to be executed in each project.

- The Ministry of Finance shall notify the control code of the State budget revenues and expenditures and guide the Ministries, branches and localities in drawing and synthesizing the draft State budget expenditures and revenues; assume the main responsibility and coordinate with the Ministries, branches and localities, with the participation of the Ministry of Planning and Investment and the Ministries in charge of the branches and sectors, in working out the draft State budget expenditures and revenues and the financing of national programs.

- The Ministries, branches and the agencies managing the national programs shall coordinate with the Ministry of Planning and Investment and the Ministry of Finance in discussing with the concerned Ministries and branches and the localities on the socio-economic development tasks and the draft budget of the fields under their charge.

- The People�s Councils and the People�s Committees of the provinces and the cities directly under the Central Government shall guide and organize the elaboration of the 1997 draft State budget in accordance with the Law on the State Budget.

2. Tempo and schedule:

- Prior to August 10, 1996, the Ministries, branches and localities shall send reports on their socio-economic development and draft budgets for 1997 to the Ministry of Planning and Investment and the Ministry of Finance which shall synthesize and submit them to the Government.

- From now to September 20, 1996, the Ministry of Planning and Investment and the Ministry of Finance shall, according to their assigned tasks, discuss with the Ministries and localities and synthesize the above-mentioned reports into a plan and submit it to the Government and the National Assembly Commissions so that it can be presented in time to the 10th session of the IXth National Assembly; at the same time, propose plans on allocating the State budget to each Ministry and the additional grants from the Central budget to each province to the National Assembly Standing Committee for decision right after the National Assembly adopts the draft State budget.

3. The Prime Minister requests the Ministers, the Heads of the ministerial-level agencies and the agencies attached to the Government, the Presidents of the People�s Committees of the provinces and the cities directly under the Central Government to closely direct the process of formulating and synthesizing the 1997 plan to ensure attainment of the set orientations, tasks and objectives.

For the Prime Minister

Deputy Prime Minister

PHAN VAN KHAI